By the end of this study the reader will be able to explain control account and know their usefulness, know the main  type of control account, prepare control account from given information, describe trade receivable statement of statement of account and prepare trade receivable statement or statement of account.

control Accounts


A control account is a record of all the financial transactions made by a company in a specific period of time. The control account is used to monitor the company's financial performance and to make sure that all the transactions are accounted for. The control account is also used to reconcile the books of accounts of the company.

In a small organisation it may be possible for one to maintain all the ledger accounts. Where a business maintain a large number of accounts it will become necessary to divide to ledger into sections and to assign the recording of each section of different persons . The main areas to which such ledgers can be divided are in the subsidiary ledger ,trade ledger, trade receivables ledger, trade payables ledger and general ledger.

In very large organization ,the sub division may further be divided among employees. Where this type of division takes place, it will be necessary to institute control on the accuracy of the postings made to each ledger.  This is achieved by maintaining total control account for trade receivable and payables in the general ledger.  The control account are referred to as control account. 

The nature and functions of control accounts:

A control account is a account, the balance of which reflects the aggregate balance of many related subsidiary account which are part of the double entry system. 

It is a memorandum record only, it does not form part of the double entry system but it is kept using double entry principle. Control accounts can be kept in respect of customers account, supplies account and expenses.  Control accounts are maintain to facilitate easy detection of error because the act as a check on the entries in the various ledger. Where the trial balance totals are not equal ,balance in each ledger can be added together and compared withe respective control accounts. Ordinary the two should be equal , where there is a difference, such ledger that fails to reconcile with control account will  be investigated rather than all the ledger account. 

Control account are also called self balancing ledger because the total trade receivable and total trade payable in the general ledger should be equal to the aggregate of the balance in the respective individual accounts in the subsidiary ledger. 

Merits of control accounts

The merits of using control accounts can be summarised as follows:
  • They can be used to locate errors more easily 
  • They make it difficult to commit fraud because they are normally under the control of responsible officers and their preparation is separate from the clerks who maintain the individual ledger accounts.
  • They provide information about the total trade receivable and total trade payables thereby making management of the receivables and payable accounts easy. 
  • They allow for account set off

sources of information for control accounts;

The information recorded in control accounts are obtain from :
  • Receivables and payables accounts
  • Returns inward and outwards accounts
  • Bills payable and receivables accounts
  • Dishonored cheques 
  • Cash paid to payables and cash received from receivables obtain from the cash book
  • Discount received and discount allowed accounts
  • Revenue day book and purchase day book. 

Receivables or revenue Ledger control account ;

Revenue ledger control accounts is the account containing the summary of all trade receivables or customer account.  What is posted on the debit side of this act is the aggregate of all the items recorded on the debit side of the receivables accounts.  The same thing applies to the credit side of the account. 

Summary of entries


  • credit revenue from revenue day book
  • Dishonored cheque from customers 
  • Debit notes issued


  • cash received from receivables as recorded in the cash book 
  • Discount allowed as recorded in the cash book 
  • Return inwards as recorded in the revenue return day book 
  • Set off between revenue Ledger control and purchase ledger control accounts 
  • Bad Sept written off

Trade payables or purchase ledger control accounts; 

This is the account containing the summary of all the accounts of the payable 
S or suppliers in the purchase ledger. 

Summary of entries in the purchase ledger control accounts.

Debit entries 

  • payment to customers obtained from cash book 
  • Return inward 
  • Cheque paid t suppliers from the cash book 
  • Discount received from the memoradum column and  the credit side of the cash book
  • credit notes
  • transfer between revenue Ledger control and purchase ledger control accounts 

credit entries 

  • Credit purchase obtained from the purchase day book 
  • Cash return from suppliers 
  • Dishonored bills payable 
Cash revenue should not be debited to the revenue Ledger control account rather, cash revenue should be debited to the cash book.  Cash purchase should also not be credited to purchase ledger control accounts but should be credited to the cash book. 

Trade receivable statement or statement of account ;

Trade receivables statements are documents sent periodically,  usually once a month, by a seller to his customers showing the position of their accounts up to a certain date. Each statement gives the particulars of the invoices, debit notes and credit notes that the seller has sent to the customer during a month , payment made and how much the customer owes the seller and when the amount will be due for payment. The statement is often a copy of the customers account in the sellers book. 

The statement may be kept for reference purpose or returned to the seller with the customers cheque . In either case neither the customer nor seller records the statement in his books. 

In summary we have explained the importance of control accounts in detection of error and in the management of subsidiary account. Also control accounts we describe the receivabled statement and how the are prepared .

A control account is an account used to hold assets and liabilities of a business in a separate account from its operating accounts. The purpose of a control account is to provide a more accurate picture of a business' financial stability. The control account should be used to track the following:

- Cash and short-term investments
- Accounts payable and accrued liabilities
- Revenues and expenses
- Profit and loss

When a business needs to borrow money, it will usually need to show that it has a good credit history. A good way to show that a business has a good credit history is to have a control account with a low amount of debt. This is because a control account with a low amount of debt will show that the business is able to pay its bills on time.

A control account is also important for tax purposes. A business will need to track its taxable income and expenses in a control account. This is so that the business can pay the correct amount of taxes.

More articles : source documents and books of origingal entry

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